Working through the crisis to deliver a more resilient future

Disruptive Innovation

On the final day of the React & Interact virtual event, we concluded a week of exploration into how some of the leading companies are not only reacting to the crisis but also looking to build a more impactful procurement function in the future.

This session was geared towards Asia-Pacific time-zones and allowed us to gain an impression of how organisations are responding to the later stages of the crisis.

Although the impacts of Covid-19 have been catastrophic, the pandemic has acted as a crucible for innovation in not just new products (or virtual events) but also in the ways in which we work together.

“Internal collaboration has really improved. Even during the crisis, when we manage it through the spirit of collaboration, it is a much more positive experience”

David Ingham, CPO, Unilever

As in the example from Unilever, we have learned that many organisations have been brought together and, for procurement, has increasingly occupied a more central role in coordinating and collaborating.

Responding to the crisis

The crisis has largely been an exercise in managing information. Accessing market information about personal protective equipment or uncovering timely information about supplier production outputs became essential to the survival of the company. Procurement’s role in handling this became urgent. But we also learned the function’s ability to pivot and operate with agility similarly has been essential to organisational success.

“We have changed our governance. During the crisis, we absolutely had to ensure that we were not duplicating work. Twice a week, we have an operational tower meeting of the procurement heads, which allowed us to make key decisions in minutes. This is vital to achieving quick decisions and key to easing geographic bottlenecks.”

Jean-Yves Krummenacher, VP regions and innovations, Danone

Furthermore, the importance of relationship management skills and collaborating with stakeholders also become key to managing the response.

“Computer systems are great but human integration – and talking to suppliers on the phone – is incredibly useful and something computers cannot provide”

Peter Truyens, CPO, Electrolux

Although data flows are undoubtedly critical, so are the regular touchpoints with suppliers to gauge their mood and allow them a channel for freer communication.

Delivering in a downturn

The reality, for now, is tough for many suppliers. Many of the participants spoke plainly about the gloomy outlook for many providers in industries that are heavily hit.

"There will be a lot of suppliers that won’t make it past year-end. Those that do make it to year-end may struggle through 2021"

Bart Ras, MD, Greensill Capital

Many CPOs unveiled measures to support their supply base through these difficult times, to provide supply continuity throughout a protracted recession. For the most severely affected vendors, procurement is extending payment terms, lengthening contracts or even exploring supply chain finance initiatives. Segmentation was a critical lesson for many, as this allows us not only to identify critical suppliers but also vendors that may represent cost opportunities.

“We see many collaborative projects for working capital management that help struggling suppliers. But there are suppliers who are cash-rich and, for these, procurement is renegotiating terms”

Chittaranjan Jha, VP services, AsiaPac, GEP

The new normal

A key question on everyone’s lips was the future after Covid-19 has abated. Although this is not certain, we did enjoy some clues in the event. Some CPOs were reviewing their offshoring arrangements, others are hunkering down for a potential trade war and some are reviewing the way in which the function thinks about its role in the business.

“The challenge going forward is asking ourselves: ‘How are managing it in a different way?’ Demand management and questioning the types things we buy is going to become very important”

Kaustubh Wadekar, CPO, Singtel

That said, some fundamental aspects of the world have been recast. We see a function that is more proactive, agile and innovative than ever. Throughout this crisis, we have seen, whether it was sourcing PPE quickly, ensuring continuous supply or protecting the supply base, procurement has been a principal agent in securing business longevity. The function’s voice will be central to the discussion of the organisation’s future.

“We’re going to go back to business as unusual.”

Dan Bartel, CPO, Schneider Electric

Procurement’s role in business will likely never be the same again.

This article is a piece of independent writing by a member of Procurement Leaders’ content team.